Employees, Retirees left with nothing under creditors protection

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Sears Canada Inc and certain of its subsidiaries (the “Sears Canada Group”) today announced that the Sears Canada Group has filed motion materials with the Ontario Superior Court of Justice (Commercial List) (“Court”) regarding orders it intends to seek in support of its restructuring efforts under the Companies’ Creditors Arrangement Act (“CCAA”) at a comeback hearing scheduled for July 13, 2017. The Sears Canada Group was granted creditor protection under the CCAA pursuant to an Initial Order issued by the Court on June 22, 2017. At that time the Sears Canada Group communicated that it would likely be seeking additional orders under the CCAA.

Sale and Investment Solicitation Process

The Sears Canada Group intends to seek the Court’s approval of a sale and investment solicitation process (“SISP”), which will be conducted by its financial advisor, BMO Capital Markets, on behalf of the Sears Canada Group and under the supervision of the Monitor, FTI Consulting Canada Inc., and the Special Committee of the Board of Directors of Sears Canada, comprised solely of independent directors. The purpose of the SISP is to seek out proposals for the acquisition of, or investment in, the Sears Canada Group’s business, assets and/or leases, and to implement one or a combination of proposals. October 4, 2017 is the deadline for the Sears Canada Group to obtain Court approval of successful bid(s) and the SISP has an anticipated completion date for all transactions by October 25, 2017.

Extension of Stay Period to October 4, 2017

The Sears Canada Group intends to seek to extend the stay period provided by the Initial Order up to and including October 4, 2017, to allow for the Sears Canada Group’s businesses to keep operating while the SISP is implemented. This date is also the deadline for the Sears Canada Group to obtain Court approval of successful bid(s).

Suspension of Certain Payments

Cash constraints at the Sears Canada Group have resulted in challenges for a number of valued stakeholders, including associates whose positions were recently eliminated or will be eliminated when a number of Sears Canada locations across the country close, retirees, suppliers and landlords. The Company previously announced that it could not continue its restructuring efforts outside of a CCAA proceeding and that it is not able to make payments to certain stakeholders; payments it would normally make if it were not cash constrained and operating under the protection of the CCAA.

The Sears Canada Group previously announced that it had obtained debtor-in-possession financing of $450 million (the “DIP Financing”). The DIP Financing requires that the Sears Canada Group comply with a budget, which does not provide for the payments listed below. Accordingly, at the hearing scheduled for July 13, 2017, the Sears Canada Group will seek Court approval for the suspension of the following payments:

·         Special payments towards the defined benefit (“DB”) component of the Sears Registered Retirement Plan (“SRRP”): These payments amount to approximately $3.7 million per month. It should be noted that the assets of the DB component of the SRRP are held by CIBC Mellon – an independent trust company – and are separate and apart from the Company’s assets. As such, they are not subject to claims by the Company’s creditors.

·         Post-Retirement Health and Dental Benefits: The average cost of continuing to pay post-retirement health dental benefits amounts to approximately $800,000 monthly (plus tax), which fluctuates depending on the number of claims made.

·         Post-Retirement Life Insurance Premiums: These payments amount to approximately $245,000monthly (plus tax).

Copies of the Company’s motion materials in connection with the Comeback Hearing will be available on the Monitor’s website at http://cfcanada.fticonsulting.com/searscanada. Sears Canada will continue to provide updates regarding its restructuring as developments warrant.

4 COMMENTS

  1. This is ridiculous and out right wrong. The bureaucrats responsible for this decision need to have their head examined. Seriously !!! Sears employees, both current and retired, are being tossed by the roadside, with such callousness that it is almost criminal. Then you wonder why ordinary people today have no faith in what was once considered decency and common sense. Where is that quality and humanity these days ??? Certainly not at Sears. Looks like taking care of the 1 % is far more important. Very,very sad.

  2. It is a sad day indeed when employees who gave stellar service to sears may have their world fall apart. We all count on our pensions and benefits continuing,,,that’s what we were promised. Governments are going to have to look at ways in which benefits and pensions can continue as promised. Would ESSAR steel…or is it really ALGOMA now ???? try to end pension payments and benefits?

  3. Sears Canada and its creditors should seek reimbursement from Sears USA to fulfill its financial responsibility.

  4. Starting to sound like another deadbeat like Essar, a totally RAW deal for employees, pensioners.
    Speaking of which, what’s going on there under the big veil of secrecy?

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